OREANDA-NEWS. Fitch Ratings has affirmed Wintrust Financial Corp.'s (WTFC) ratings at 'BBB/F2'. The Rating Outlook remains Stable.

The rating action follows a periodic review of the midtier regional banking group, which includes BankUnited Inc. (BKU), BOK Financial Corp. (BOKF), Cathay General Bancorp (CATY), East West Bancorp (EWBC), First Republic Bank (FRC), First Horizon National Corp. (FHN), First National of Nebraska Inc. (FNNI), Fulton Financial Corp. (FULT), Hilltop Holdings, Inc. (HTH), Synovus Financial Corp. (SNV), TCF Financial Corp. (TCB), Trustmark Corp. (TRMK), UMB Financial Corp. (UMBF) and Wintrust Financial Corp. (WTFC).

Company-specific rating rationales for the other banks are published separately, and for further discussion of the midtier regional bank sector in general, refer to the special report titled 'US Banks: Midtier Regional Bank Periodic Review,' to be published shortly.

KEY RATING DRIVERS

IDRs, VIABILITY RATINGS, AND SENIOR DEBT

Today's affirmation reflects the company's consistent earnings performance, conservative risk culture, and strategic execution. Although asset growth remains fairly robust relative to peers due to its continued purchase of smaller community banks, Fitch notes that WTFC has maintained adequate capital and has continued to successfully integrate acquisitions. The Stable Outlook reflects Fitch's expectation that asset growth will continue to be supported by capital retention, and asset quality will remain strong relative to peers.

WTFC continues to have relatively strong asset quality compared to similarly rated peers, which Fitch believes is a reflection of management's consistent conservative credit risk philosophy. Nonperforming assets (NPAs) as a percentage of loans and real estate owned (REO) have continued a downward trend, dropping from 1.29% at fourth quarter 2014 (4Q14) to 1.09% at 3Q15. Fitch notes that the decrease has been accomplished with relatively little credit loss, at just 11bps for the nine months ended 2015 when excluding covered loans.

Fitch views the company's premium finance loan book as a positive ratings driver given the balance sheet diversity it provides, the low credit losses generated out of it, and WTFC's franchise within the space. WTFC remains one of the top three premium finance originators in the country. These two portfolios continue to account for nearly one-third of WTFC's loan book, providing the company with exposure to an asset class that historically has generated low levels of credit losses. Annualized normal net charge-offs (NCOs) related to WTFC's property and casualty (P&C) premium finance portfolio have averaged well-under 20bps over the last 15 quarters while, the life insurance premium finance book has not had a net charge-off since 2011.

Furthermore, Fitch views WTFC's continued, consistent strategy of buying smaller community banks within the greater Chicagoland's fragmented banking market positively. WTFC continues to demonstrate a strong ability to announce, close and integrate M&A transactions relatively quickly. While some of this is a function of the typical size of the banks WTFC has purchased (smaller-sized community banks typically under $1 billion in assets), it also points toward adequate risk controls and risk systems, especially as they relate to BSA/AML, which have caused delays in other bank acquisitions.

Over the near- to medium-term, Fitch believes that WTFC's rating is constrained at its current level due to its tepid earnings performance relative to higher rated peers. The company's nine-months ended 2015 return on assets (ROA) of 0.79bps is lower than higher-rated institutions as well as the peer group median of 97bps. However, Fitch views WTFC's performance in the context of its lower overall risk profile and observes that earnings are adequate to generate capital that supports asset growth. Fitch expects earnings to continue to lag peers over the medium term given WTFC's relatively higher cost structure and higher deposit costs compared to peers. Fitch recognizes that WTFC has strategically been able to diversify its deposit profile by reducing its reliance on certificates of deposits (CDs) through its acquisitions during and after the financial crisis, which should alleviate deposit costs in a rising rate environment. Still, Fitch expects the company's level of reliance on higher-priced CDs to remain elevated relative to peers given its presence in and around Chicagoland with its high net worth populations.

Further constraining the company's ratings is its geographic concentration within its loan book. The vast majority of WTFC's core loan book (excluding premium finance loans) is located in the state of Illinois with much of it in the greater Chicagoland area. At 3Q15, 76% of WTFC's commercial real estate book was located in Illinois. In general, Fitch views the Chicago market as densely populated by banks and as economically challenged. Fitch believes this geographic concentration could result in prolonged periods of tepid earnings and elevated NPAs relative to peers through the credit cycle. This was shown during 2009-2012 when levels of NPAs and NCOs remained elevated compared to higher rated peers even with what Fitch considers as a conservative risk appetite.

Fitch notes that WTFC has attempted to diversify its geographic concentration through acquiring a pair of community banks in south-eastern Wisconsin and through the continued build-out of its national mortgage banking operation and leasing platform. Still, today's rating action incorporates Fitch's expectation that the company will remain concentrated in and around the Chicagoland area due to its strategy and business model.

With a TCE ratio of 7.33% as of 3Q15, capital is considered adequate relative to its peers and overall risk profile. Regulatory capital ratios are also considered sufficient. Fitch notes that WTFC's rating not only reflects its ability to maintain an adequate capital base through the cycle, but also its ability to maintain capital even with strong asset growth and its demonstrated ability to raise capital in the private and public markets. This was once again evidenced in 2015 when the company successfully executed a $125 million preferred stock issuance at reasonable market terms.

Similar to other areas of the company, liquidity and funding are managed conservatively. Consistent with its stated parameters, Fitch observes that WTFC typically maintains a loan-to-deposit ratio of between 85% and 90%, running the ratio down when management believes the loan market is getting overheated. The primary source of funding and liquidity for WTFC comes from its local deposit markets in the surrounding Chicagoland area.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by WTFC and by various issuing vehicles are all notched down from WTFC or its bank subsidiaries' VRs in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles.

LONG- AND SHORT-TERM DEPOSIT RATINGS

WTFC's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. Such preference gives deposit liabilities superior recovery prospects in the event of default.

HOLDING COMPANY

WTFC's IDR and VR are equalized with those of its operating subsidiaries (listed below), reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Ratings are also equalized reflecting the very close correlation between holding company and subsidiary failure and default probabilities.

SUBSIDIARY AND AFFILIATED COMPANY

The IDRs and VRs of WTFC's bank subsidiaries are equalized with WTFC's IDR reflecting Fitch's view that they benefit from the cross-guarantee mechanism in the U.S. under FIRREA.

SUPPORT RATING AND SUPPORT RATING FLOOR

WTFC has a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, WTFC is not systemically important and, therefore, the probability of support is unlikely. IDRs and VRs do not incorporate any support.

RATING SENSITIVITIES

VR, IDRs, AND SENIOR DEBT

Over the near- to medium-term, Fitch views WTFC's ratings as solidly situated at the current rating level of 'BBB'. However, WTFC's consistent and conservative strategy could result in positive ratings momentum over the long term. For example, if earnings performance were to improve and converge with higher-rated peers consistently, due to WTFC's ability to lag deposit pricing better than during prior Fed tightening, while management maintained its solid, conservative risk management practices, Fitch could take positive rating action. Positive action would also depend on WTFC maintaining relatively strong asset quality over time.

Fitch believes there is limited downside to WTFC's current ratings. Although currently viewed as unlikely, negative trends in earnings due to a reversal in current asset quality trends (particularly in the premium finance book) leading to capital deterioration could prompt negative rating action. Fitch expects WTFC to continue to be acquisitive in the community bank space; however, if growth (either through acquisition or organic) were to exceed Fitch's comfort level and capital levels fell materially below their current levels, then the rating or Outlook could be adversely affected. Fitch would also analyse any individual transaction that did not fit with WTFC's current business model for its strategic and financial implications, which could lead to rating changes.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

The ratings for WTFC and its operating companies' subordinated debt and preferred stock are sensitive to any change to WTFC's VR.

LONG- AND SHORT-TERM DEPOSIT RATINGS

The long-and short-term deposit ratings are sensitive to any change to WTFC's long-and short-term IDR.

HOLDING COMPANY

Should WTFC's holding company begin to exhibit signs of weakness, demonstrate trouble accessing the capital markets, or have inadequate cash flow coverage to meet near-term obligations, there is the potential that Fitch could notch the holding company IDR and VR from the ratings of the operating companies. However, this is viewed as unlikely for WTFC given the strength of the holding company's liquidity profile.

RATING SENSITIVITIES - SUBSIDIARY AND AFFILIATED COMPANY

As the IDRs and VRs of the subsidiaries are equalized with those of WTFC to reflect support from their ultimate parent, they are sensitive to changes in the parent's propensity to provide support, which Fitch currently does not expect, or from changes in WTFC's IDRs.

SUPPORT RATING AND SUPPORT RATING FLOOR

Since WTFC's Support and Support Rating Floors are '5' and 'NF', respectively, there is limited likelihood that these ratings will change in the foreseeable future.

Fitch has affirmed the following ratings:

Wintrust Financial Corporation
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Subordinated Debt at 'BBB-';
--Preferred Stock at 'B+';
--Support at '5';
--Support Rating Floor at 'NF'.

Lake Forest Bank and Trust Company
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Hinsdale Bank and Trust Company
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Wintrust Bank
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Libertyville Bank and Trust Company
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Barrington Bank and Trust Company, NA
Long-Term IDR at 'BBB'; Outlook Stable;
Short-Term IDR at 'F2';
Viability Rating at 'bbb';
Long-Term Deposits at 'BBB+';
Short-Term Deposits at 'F2';
Support at '5';
Support Rating Floor at 'NF'.

Crystal Lake Bank and Trust Company, NA
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Northbrook Bank and Trust Company
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Schaumburg Bank and Trust Company, NA
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Village Bank and Trust
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Beverly Bank and Trust Company, NA
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Town Bank
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Wheaton Bank and Trust
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

State Bank of the Lakes
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

Old Plank Trail Community Bank, NA
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.

St. Charles Bank and Trust Company
--Long-Term IDR at 'BBB'; Outlook Stable;
--Short-Term IDR at 'F2';
--Viability Rating at 'bbb';
--Long-Term Deposits at 'BBB+';
--Short-Term Deposits at 'F2';
--Support at '5';
--Support Rating Floor at 'NF'.